Alternate proposal favors Cal Am on dam costs

California American Water should be allowed to charge its local customers for the past and future costs of removing the San Clemente Dam and re-routing the Carmel River, a member of the state Public Utilities Commission is proposing.

The alternate proposed decision includes the already-incurred expense of buttressing or thickening the aging dam, and an equity return for its shareholders.

That means Cal Am's local customers could be paying not only the company's $49 million share of the $83 million project, a collaboration with the state Coastal Conservancy and National Marine Fisheries Services, but also about $26 million already spent to keep the dam from crumbling in an earthquake.

The alternate proposed decision issued last week by Catherine Sandoval, one of five members of the state Public Utilities Commission, found that Cal Am had acted appropriately in managing the dam in the past, and that the project represented such a benefit to customers that it was reasonable for them to pay for all work and more.

Sandoval's proposal, which generally agrees with most of Cal Am's request for project cost recovery, is in stark contrast to an earlier proposed decision from CPUC administrative law judge Christine Walwyn, who is overseeing the proceeding.

In her proposed decision issued in November, Walwyn found the company did not act prudently in pursuing the buttressing of the dam and should not be allowed to charge its customers for those costs.

That comported more closely with the position taken by the CPUC's Division of Ratepayer Advocates, which argued that Cal Am had so poorly managed the dam that it should not even be allowed to charge its customers its share of the project costs, let alone past expenses, and should not be allowed to earn a profit for its investors.

Cal Am's Catherine Bowie said in a statement that Sandoval's proposed decision is welcome, though she also pointed out that the commission has not yet issued its ruling.

"The alternate proposed decision, while much closer to what we requested in our application, is nevertheless, one more step in a very involved process of review and oversight by the CPUC," Bowie said. "The final outcome remains unknown until the full commission votes on the project."

A 30-day public comment period on the alternate proposed decision must be completed before the commission can consider the project, which could occur as soon as May 24.

Meanwhile, a 45-day public review period for the project's draft supplemental environmental impact report began last week and will continue through June 7.

The proposed project would include removing the 106-foot dam built in 1921, and re-routing the river to bypass a portion of the waterway that will be used to dispose of built-up sediment from behind the dam. The project is designed to permanently resolve the public safety threat if the dam falls because of an earthquake or flood. It would restore unfettered access and improved habitat for the federally threatened steelhead trout and California red-legged frog.

Cal Am's $49 million share of project costs represents the least-cost option to make the dam safe during an earthquake. The Coastal Conservancy and National Marine Fisheries have committed about $35 million through public and private sources.

Plans call for work to begin as soon as September and be finished in about three years.

Counting all costs, Cal Am customers could end up paying about $138 million during the next two decades for the project, including past costs and shareholder equity.

During public hearings last year, Cal Am customers expressed concern about the prospect of adding another charge to their water bills because they are already expected to double or triple because of the newly proposed Monterey Peninsula Water Supply Project, and other pending rate increases.

However, environmental advocacy groups such as the Carmel River Watershed Conservancy and the Carmel River Steelhead Association have been staunch backers of the project, which they tout as the best opportunity to resolve a long-standing safety issue and vastly improve the river's habitat.